Moody’s maintains negative outlook on Adani Transmission

The rating agency, however, affirmed the ‘Baa3’ senior unsecured bond ratings of ATL.

Moody’s Investors Service on Friday said that it has maintained Adani Transmission’s (ATL) ‘negative’ outlook as it expects the company’s financial metrics to weaken as a result of the incremental debt required to complete its Rs 13,000-crore capital expenditure programme over the next four to five years.

After the latest addition of the Warora-Kurnool transmission project in March, ATL’s capital programme now includes 11 projects. The rating agency, however, affirmed the ‘Baa3’ senior unsecured bond ratings of ATL. Obligations rated Baa by Moody’s are judged to be medium-grade and subject to moderate credit risk and “may possess certain speculative characteristics”.

“As such, in the face of the potential sizeable capital expansion anticipated, management’s ability to instill a sustainable capital structure that would balance the group’s growth aspirations with its commitment to maintaining an investment grade credit profile would be critically important and a key driver for ATL’s ratings,” said Spencer Ng, a Moody’s vice president. ATL’s capital projects for its integrated utility business in Mumbai may have a negative impact on its credit metrics and expose the group to execution risk, the agency noted.

ATL’s exposure to any direct financial impact from the coronavirus outbreak is manageable, as most of its earnings are protected from variations in volume demand. However, Moody’s said that several of its greenfield transmission line projects have been delayed because of the lockdown in 2020 and could face further delays if the current second wave of infections in India leads to the reintroduction of restrictions on construction activities.
Some of ATL’s transmission projects have also been delayed due to delays in securing the necessary environmental approval.